In the wake of a public hearing, the Connecticut legislature is working on changes in a controversial bill that would ban insurer use of consumer credit scores in underwriting auto policies, a key legislator said.

State Rep. Steve Fontana, D-North Haven, co-chair of the Committee on Insurance and Real Estate, said via e-mail that his committee has “authored the bill based on its own ideas and those presented to it by the Attorney General [Richard Blumenthal] and other members of the General Assembly. We will continue to work on the bill to revise and refine our ideas based on further input from the general public.”

Mr. Fontana gave no timetable for further action on the bill.

The measure under consideration would also ban using a policyholder’s neighborhood as an auto rating factor.

Last week the bill (HB 6444) was the subject of a hearing by Rep. Fontana’s committee

The controversy over the use of credit scores in underwriting has recently been a hot topic, as debates have sprung up from Florida to North Dakota.

Mr. Blumenthal, in his testimony, urged support for the bill. “As credit problems proliferate, this pernicious practice sends people into financial freefall. Basing insurance cost and eligibility on credit history is nonsensical–punishing people for losing their jobs and their homes, and compounding economic catastrophe,” he said.

But the Property and Casualty Insurers Association of America (PCI) testified that banning both measures will adversely affect consumers in the state as a whole by raising premiums for people who do not have a high risk factor.

“The net effect of HB 6444 would be to make insurance underwriting and rating less accurate and result in consumers in lower risk areas subsidizing consumers in higher risk areas,” Paul Magaril, PCI regional manager and counsel, said in a statement,

PCI said that Connecticut insurers have been able to use both geography and credit scores as underwriting tools for years, and the organization sees no reason to alter the practice now.

The group noted that a 2007 Federal Trade Commission report found that credit scores were “effective predictors of risk.”

PCI added that the state’s territorial rating system is also an effective underwriting tool. Under the current law, insurers may consider claims in a specific geographical area, but may only give that 75 percent weight. The remaining 25 percent must come from statewide data. The bill would phase in a 50-50 split of statewide versus local claims data.

Mr. Blumenthal also testified that, “excessive rates affect virtually every insurance consumer, but hit hardest are good drivers who live in the cities and older suburban towns often drivers–with incomes lower than the state average–who can least afford to pay higher insurance premiums.”

The argument for the bill, according to Rep. Fontana, is that credit scoring and geography tend to marginalize people with lower incomes and some minorities. It is thought that in these hard economic times, people who can least afford it are paying higher premiums.